Sri Lanka

TOURISM

In 1966 the government established the Ceylon Tourist Board,
vesting in it the responsibility for invigorating the tourist
industry. The board, operating as an autonomous corporation, was
charged with promotional as well as organizational
responsibilities. Most provisions for tourists were in the
private sector, but the board had facilities in areas where
private ones were considered inadequate.

Tourism expanded rapidly after 1966. The main attractions are
the beach resorts of the southwestern coastal region, but many
tourists also visit the ancient cities of the dry zone, the
historic city of Kandy, and the mountainous region dominated by
tea plantations. Between 1976 and 1982, the number of tourist
arrivals increased at an annual rate of almost 24 percent,
reaching a peak of 407,230 before declining to 337,342 arrivals
in 1983 as a result of the Tamil insurgency. More than half the
arrivals were from Western Europe.

Serious civil disturbances starting in July 1983 and the
subsequent violence badly affected tourism. Total arrivals were
230,106 in 1986, down 43 percent from 1982. To ease the plight of
the industry, the government provided various concessions to
hotels, such as the rescheduling of loans and the reduction of
the turnover tax from 10 percent to 5 percent. The Ceylon Tourist
Board also undertook a crash promotion program in an attempt to
restore the island's image in world tourist markets. Tourist
arrivals in the first six months of 1987, however, showed a
decline of 23 percent compared with the same period the previous
year. In early 1988, the outlook was for further contraction.

In 1988 it remained unclear whether the policies of economic
liberalization Sri Lanka has pursued since 1977 would succeed in
their principal goals of employment, wealth creation, and
economic diversification. Although increased rice production, the
growth of textile manufacturing, and an improved infrastructure
were successes that could be attributed to the post-1977
policies, these gains came at the cost of a mounting foreign and
domestic debt and declining living standards for the poor. In the
mid-1980s, the declining security situation began to have an
increasingly negative impact on the economy, and in early 1988
economic prospects for the 1990s appeared to be linked at least
in part to a resolution of the ethnic conflict.

* * *

The most current and easily accessible sources on the Sri
Lankan economy are two publications of the Economist Intelligence
Unit in London: Country Profile: Sri Lanka, an annual
survey of the economy; and Country Report: Sri Lanka, a
quarterly publication that includes the latest economic
information. For agriculture, the annual South Asia: Situation
and Outlook Report, published by the Economic Research
Service of the U. S. Department of Agriculture, is also useful
and makes use of detailed information found in two annual
publications of the Central Bank of Sri Lanka, the Annual
Report of the Central Bank of Sri Lanka and the Review of
the Economy.

No book-length general survey of the Sri Lankan economy
appeared in the decade after the change of economic direction in
1977, and the earlier works, although valuable for historical
background, are out of date. The various essays in Sri Lanka:
A Survey edited by K. M. de Silva portray the course of the
economy from independence to the mid-1970s. A critical analysis
of the post-1977 economic policies is Ronald Herring's "Economic
Liberalization Policies in Sri Lanka: International Pressures,
Constraints and Supports." A more favorable evaluation of these
policies is by Surjit S. Bhalla and Paul Glewwe, "Growth and
Equity in Developing Countries: A Reinterpretation of the Sri
Lankan Experience." This reference should be read in conjunction
with the rebuttals by Paul Isenman and Graham Pyatt in World
Bank Economic Review. (For further information and complete
citations, see Bibliography).